How lawsuits affect your ability to consolidate with a debt management program.
A debt collector is suing me. Is it too late to go through debt consolidation? Can debt consolidation stop a lawsuit if they already filed? If not, then what else can I do?
Debbie G. in Gardner, MA
It’s not too late to consolidate with a Debt Management Program. However, that won’t stop legal actions from debt collectors or collection agencies. Debbie, we can still contact the debt collectors on your behalf to see if they’re willing to accept payments.
The debt collection industry is very nuanced, and there are details our credit counselors can help you figure out – they just can’t provide legal advice. A legal threat isn’t the same as legal action. Debt collectors can threaten legal action but can’t do so without being truthful in their intentions.
A toothless legal threat from a debt collector is actually illegal on their part. You have rights to fair debt collection and can learn more about them here.
This video featuring Consolidated Credit’s President Gary Herman explains more of what you can expect if a debt collector threatens legal action:
Can You Use Debt Consolidation to Stop a Collector Lawsuit?
Consolidated Credit’s President Gary Herman explains how and why lawsuits over unpaid debt may not affect your ability to consolidate if you enroll in a debt management program. Even if you’re facing a civil suit, you can still use a debt management program to eliminate your debt.
First, you need to be clear that they’re actually suing you. Did you receive court documents or did someone just say to you that they may consider legal action as a next step?
If a debt collector is seeking legal action, we can still contact them on your behalf and see if they’re willing to take payments. There’s nothing we can do to stop the legal action. They just want someone to contact them and tell them how much money the client can afford and set up payments.
If they’re saying they’re thinking about seeking legal action or you’ve got a pending date, either way you can still join the debt management program. We’ll still contact your creditors. We can’t offer any legal advice and we can’t stop the court date, but we can still set up payments that may stick straight through your court date.
Always keep in mind that enrolling in a debt management program means that a certified credit counseling team is acting and working on your behalf in negotiating with your creditors. Essentially, you can’t enroll in the program unless your creditors agree to the adjusted payment schedule you set up with your credit counselor.
What to expect if a debt collector sues you over an unpaid debt
There’s a very big difference between a collector saying that they’re going to sue you and actually taking legal action. If a collector formally sues you for debt in civil court, you will receive an official summons from the court. You must respond to the summons by the date indicated, or you could face more severe legal issues.
You have two basic options for how to answer the summons:
- Try to work out a payment plan so you can avoid going to court
- Let the suit proceed and let the courts decide
Generally, the best option is to work something out to avoid the hassle and stress of going to court. In this case, you have a few options.
- Debt consolidation through a debt management program will repay everything you owe. This solution can give a solution for all your debts, including those that are still current with the original creditor.
- Debt settlement, where you offer the collector a percentage of what you owe in exchange for discharging the remaining balance.
If you’re trying to avoid any further damage to your credit score, consolidation is the better option. You may want to consider settlement if you’re just looking for the fastest exit possible for the least amount of money.
Compare debt management and debt settlement side-by-side »
Consolidating debt when you’re being sued by a debt collector
Enrolling in a debt management program (DMP) puts a certified credit counseling team on your side. They work on your behalf when it comes to negotiating with creditors and collectors. Once you work out a payment you can afford, the credit counseling team gets to work calling everyone who holds a debt you want to include in the program. Essentially, creditors and collectors must agree to take payments through your DMP, the adjusted payment schedule you set up with your credit counselor.
Why collectors will be willing to accept payments through a DMP
Including a debt that’s already in collections in your DMP means that you’ll basically end up repaying the full balance owed. That’s the best possible outcome for a collector. Debts in collections don’t have interest charges, and the collector can’t add any fees to what you owe. So, the best-case scenario for a collector is that you make arrangements to repay the full balance. That’s exactly what happens when you consolidate – the full balance gets repaid.
That gives a collector who’s thinking about suing you a reason to pause on that action. It even gives a collector who’s already started a lawsuit reason to reconsider. If they take you to court, they most likely will only recoup a portion of what you owe. The court will decide on the fair amount for you to repay based on your income and financial situation.
So, if a credit counselor calls that collector and tells them you’re willing to repay the full amount under a DMP, that’s an offer that comes down in their favor.
Talk to a certified credit counselor now for free debt evaluation to discuss your best options for debt relief.
